Amazon Price Check May Be Evil But It's the Future

Amazon's new price check app gives the online giant a number of advantages over its brick-and-mortar competition but it's the logical next step for online retail in an age of mobile tech.

Online retailer
Amazon.com has stirred controversy with its new app, Price Check. The app allows consumers to scan bar codes in local stores and compare prices directly with Amazon. Many have argued that the app gives the online giant an unfair advantage over its smaller competitors.

Unlike brick-and-mortar shops, online retailers don't pay sales tax unless they have a physical presence in a state, and they don't have to staff an actual store either. The lower overhead allows them to undercut the competition.

Amazon's Price Check app is the logical next step for online retailers. Up to this point, savvy shoppers would go to a physical store like
Best Buy or
Staples and take gadgets for a trial run. Once they'd checked prices and tried out products, they would go back home, fire up the computer, and find a better deal. Amazon's Price Check let's you do this from the comfort of the store itself, basically turning its competitors into showcases for Amazon's products.

You can see why retailers would be upset. And you can see why the announcement might give Amazon a lot of bad press.

Forbes contributor Tim Worstall thinks that the promotion of the app - which gives customers $5 off purchases made through the Price Check app up to $15 - is a clever strategy for gathering price data:

And that’s why it’s all such a clever idea. Because the cost of collecting this information has now been loaded onto the shoulders of Amazon’s customers instead of Amazon’s employees. Further, they’ll of course get vastly more information from millions of users than anything they could possibly have afforded to finance internally.

And this is one of the great games of the modern era. If you can get other people to create the inputs to your business, get other people to create your inputs and then give them to you for free, then you’ve just reduced to near zero one of the great costs of being in business: your inputs.

But what about the bad press? Janet Novak argues that all that bad publicity is still publicity - and free publicity for that matter. So Amazon is basically getting free price-gathering information from customers and free publicity from the media who rush toward controversy like moths to flame (including your humble narrator.)

Furthermore, Janet argues, all that bad press might lead to a new nationwide law allowing states to collect sales tax from online retailers, something she argues would work in Amazon's favor:

Other web only sellers don’t have its network of physical facilities. If Amazon and its fulfillment merchants have to collect sales tax and other Internet-only retailers do not, the Amazon crowd will have the same 6% to 10% sales tax related price disadvantage that the big bricks and mortar chains do now. (Because they also have physical stores, Best Buy and Wal-Mart collect sales taxes when they sell on the Web.) Amazon is now supporting legislation that would allow the states to force sales tax collection by Internet retailers who have no physical presence—that is, by its competitors.

In other words, all online retailers may have to start collecting taxes, just when Amazon was about to join the ranks of brick-and-mortar stores thanks to its distribution centers. If Amazon is going down, well then everyone else is going down with it. At this point, bad press for Amazon is basically bad press for all online retailers and the legal consequences will be collective.

No doubt Amazon has read the writing on the wall, which explains not only the publicity stunts but also the move into the tablet market. The Kindle Fire is basically a portable cash register and Amazon knows it. Apps like Price Check help turn all your mobile devices into little cash registers for the company.

This is the future of online retail. Expect price checking apps from lots of other companies in the near future. Brick-and-mortar retailers and booksellers will have to respond by offering something that online stores simply can't offer: an experience.

I'm writing this from a local used bookstore. But it's not just a bookstore. It's also a seller of antiques, electronics, video games, and music. And it's not just a retailer. I'm sitting in the very crowded cafe at the front of the store using the free wifi they provide. Of the dozen or so tables, not a single one is vacant, and people are sitting and reading and working throughout the store in nice, comfortable cushioned chairs.

Some nice music is on in the background. It's quite pleasant. At other times there is live music here, including music for kids. There are book readings, author signings, and events for the local book festival. You can trade in old books and music for credit, and you can even use this credit for coffee at the cafe. This is an experience that Amazon can't and never will be able to replicate.

But I'm not a die-hard buy local guy. I shop at Amazon. I probably won't use their Price Check app. It just doesn't strike me as very fair. It's a fine idea, and you can hardly blame Amazon for jumping on it - if they hadn't, somebody else soon would have. But as Richard Russo writes in the New York Times, this may be a good short-term business strategy but it's not necessarily an endearing move for the long-term:

Critics may appear weak today, but they may not be tomorrow, and if the wind shifts, Amazon’s ham-fisted strategy has the potential to morph into a genuine Occupy Amazon movement. And even if the company is lucky and that doesn’t happen, what has it really gained? The fickle gratitude of people who will have about as much loyalty to Amazon tomorrow as they do today to Barnes & Noble, last year’s bully? This is good business? Is it just me, or does it feel as if the Amazon brass decided to spend the holidays in the Caribbean and left in charge of the company a computer that’s fallen head over heels in love with its own algorithms?

This is what I mean when I argue that local businesses have to compete by building not just a shop but an experience. Customer loyalty can't be had simply by the cheapest prices any more. Local booksellers and retailers have to be even more clever than the online giants and big box stores. But they have something that the big competitors don't have: each local outfit is unique. Plenty of customers are willing to pay a premium just for the quirkiness of shopping at a place that's one of a kind.

Amazon is free to do whatever it likes, but consumers who like unique, quirky local places like the bookstore I'm currently at should probably not gather price information for the online shops that threaten to put the little guys out of business. Shop everywhere. I do. I shop at Amazon regularly. But I wouldn't dream of spying on my local bookseller for the behemoth in the market.

Ultimately we'll see apps like Price Check merge with the social media experience. We'll see what other people are pricing and where. Social media and mobile technology will change the way we shop, the way we're advertised to, and the way we navigate the web and the physical spaces in our lives. Maybe local businesses can offer us the antithesis of this experience. In some ways, this might be exactly what an overstimulated, hyper-connected consumer base might want.